U.S. talks tough, but preserves key business dealings with Russia

WASHINGTON - President Barack Obama and members of Congress are finding it's easier to talk the talk than to walk the walk when it comes to punishing Russia for meddling in the Ukraine.

The U.S. space program is relying on Russia to ferry U.S. astronauts to and from the orbiting, U.S.-built International Space Station at a rate of $70 million a seat.

Texas-based Exxon Mobil Corp. and other far flung U.S. energy companies are deeply invested in multibillion-dollar oil exploration and production deals with Russia.

And despite U.S.-Russian tensions, the Pentagon is moving ahead to complete a politically sensitive, $1.1 billion deal to provide 61 Russian-built helicopters to beleaguered Afghan allies as U.S. troops withdraw from a 13-year war.

U.S. officials are talking tough, but with so much invested in the U.S.-Russian relationship since the end of the Cold War, questions persist over whether threatened U.S. penalties can make a difference.

Treasury Secretary Jack Lew bluntly warned Russian Finance Minister Anton Siluanov last week that the United States is "prepared to impose additional significant sanctions on Russia if it continues to escalate the situation" in Ukraine.

Lew's comments signaled continued resolve by the Obama administration as Putin threatens to take over parts of eastern Ukraine after annexing the Crimean peninsula last month.

"We stand ready to impose further sanctions," Obama has warned. "Further provocations will achieve nothing except to further isolate Russia and diminish its place in the world."

'Cold War II'

Rep. Ted Poe of Humble, a Republican member of the House Foreign Affairs Committee, insists the United States "remain firm," adding: "Putin has not flinched at what we have done so far and shows no signs of retreating from Cold War II. Now is not the time to back down."

Western allies "need to adopt progressively stronger economic sanctions" if Russia refuses to halt threatening actions," adds Rep. Gene Green, a Houston Democrat who has served in Congress since 1993. "While the U.S. has been able to maintain a working relationship with Russia during past controversies, this violation has ended U.S. collaboration with Russia on several fronts, including space exploration."

NASA has suspended official contacts, visits, emails and teleconferences between U.S. and Russian officials "given Russia's ongoing violation of Ukraine's sovereignty and territorial integrity."

Yet the crown jewel of U.S.-Russian cooperation in space - the International Space Station - has been "excepted" from NASA's administrative cold shoulder, says Michael O'Brien, associate administrator for international and interagency relations.

The $70 billion satellite launch operation that relies on Russian RD-180 rocket motors to propel U.S.-built Atlas rockets and U.S. satellites into orbit is also expected to survive a Pentagon review.

The U.S. energy industry is equally interdependent with Russia. Exxon Mobil and BP are collaborating with the Russian state oil company to develop Caspian Sea projects.

Exxon Mobil also has a pioneering $3.2 billion deal with Rosneft to explore Russia's portion of the Arctic Ocean in return for providing Rosneft energy development prospects in Exxon Mobil leased deepwater zones in the Gulf of Mexico and on land in Texas.

The firms' corporate leadership has been circumspect about the threat of sanctions. But the U.S. Chamber of Commerce has been more blunt.

"All too often, unilateral sanctions have been imposed for ill-defined purposes or with little consideration of their real impact,"it cautioned. "Rather than altering the behavior of foreign governments, these sanctions have often damaged U.S. economic interests at home and overseas."

Russian helicopters

Strains over the Ukraine are contributing as well to a review of a rare arms deal between the Pentagon and the Russian state arms exporter Rosoboronexport. Lawmakers including Poe and Sen. John Cornyn, R-Texas, have been pressing the Treasury Department as well as Secretary of State John Kerry to freeze final payments for the 24 helicopters that remain to be delivered.

So far, the Pentagon has not broken the contract or suspended payments.

The economic stakes are so large that inflicting economic damage on Russia threatens to backfire across the economies of the 28-nation European Union and even the United States.

Western economies export $250 billion a year to Russia. Companies based in the U.S. and Europe have $500 billion invested there.

And Russia has $400 billion invested in the U.S. and Europe.

So far, the United States has relied on targeted inconvenience, barring visits by 20 senior Russian officials from Putin's inner circle and wealthy oligarchs, as well as freezing dealings with Bank Rossiya, in Putin's hometown of St. Petersburg.

The Russian economy is too large and diverse and Putin is too autocratic to be susceptible to outside economic pressure, says Gary Hufbauer, author of "Economic Sanctions Reconsidered."

Robert Pape, author of "Why Economic Sanctions Do Not Work," has found that "even in the weakest and most fractured states, external pressure is more likely to enhance the nationalist legitimacy of rulers than to undermine it."

America can respond in the meantime by abandoning military cutbacks, reinstating the missile defense shield in Eastern Europe and exporting liquid natural gas to Europe to break Russia's stranglehold over natural gas supplies to eastern and Western Europe, Brady said.

Beyond potentially escalating economic penalties, the Obama administration has already signaled Russia by staging joint military exercises with 450 American and Romanian troops in Romania, adjacent to Ukraine.

The Pentagon also dispatched the guided missile destroyer USS Donald Cook to join the USS Truxtun in the international waters of the Black Sea, notably the home port of Russian's southern fleet.

And the Pentagon expanded joint military exercises in Poland by adding 18 U.S. F16 fighters and 300 personnel to previously scheduled drills in a nation that has agreed to station elements of the U.S. defensive missile shield in 2018.

"There should be no illusion that we've done everything we can do," said Lew, the treasury secretary, who has authority to expand economic sanctions at any time. "We've put in place a blueprint that makes clear that there's quite a bit more we could do.